ACCC gives Telstra certainty on ADSL2+ rollouts

Summary:update The Australian competition regulator today challenged Telstra to switch on ADSL2+ broadband services nation-wide, saying the telco could easily gain regulatory certainty on rival access. Last November Telstra launched uncapped ADSL1 (up to 8Mbps) and ADSL2+ (up to 20Mbps) broadband, however, it constrained the higher 20Mbps speeds to around 360 locations where competitors were already providing services.

Last November Telstra launched uncapped ADSL1 (up to 8Mbps)
and ADSL2+ (up to 20Mbps) broadband, however, it constrained the
higher 20Mbps speeds to around 360 locations where competitors
were already providing services.

The telco made it clear it did not wish to be forced by
regulations to provide wholesale ADSL2+ access as it currently
does ADSL1.

But in a wide-ranging speech to the Australian
Telecommunications Users Group (ATUG) conference in Sydney today,
Australian Competition and Consumer Commission (ACCC) chairman
Graeme Samuel said there was no reason Telstra couldn't provide
the services in a multitude of other locations.

The telco is currently offering up to 8Mbps ADSL1 services in
some 2400 locations.

"Telstra argues that regulatory barriers are preventing it
from rolling out ADSL2+ to more [telephone] exchanges," said
Samuel. "As I have already said, the ACCC has clearly stated that
a compelling case has not been made for regulating a wholesale
DSL service."

The ACCC supremo said there was additionally "a very easy way"
for Telstra to receive "absolute regulatory certainty" about the
treatment of the new ADSL2+ services.

"As we have discussed with Telstra, if Telstra wants a letter
from the ACCC guaranteeing regulatory certainty, all it needs to
do is write one to the ACCC first asking for regulatory
certainty," he said.

"Let me be perfectly clear," stated Samuel. "This means that
if the ACCC is satisfied that an exemption should be granted, it
would not force Telstra to give access to its competitors to this
particular service. You can't get much more certainty than
that."

He said Telstra had indicated it could "flick the switch" on ADSL2+ coverage in a variety of extra areas in as little time as 48 hours.

Getting costs right
Samuel also took aim at Telstra over the telco's claimed figures over the value of its copper network -- a key factor used when pricing decisions are made about competitor access to the infrastructure

"Since the Part XIC access regime commenced in 1997, the ACCC has consistently accepted Telstra's proposals to set prices based on its hypothetical, "forward-looking cost models (known as TSLRIC)," said Samuel, noting it was only recently that Telstra had started to argue that prices should be based on its actual costs. Part XIC of the Trade Practices Act 1974 establishes a regime for regulating access to carrier services in the telecommunications industry.

Highlighting problems with the TSLRIC model, Samuel said the ACCC would give "serious consideration" to Telstra's costing claims if the telco was prepared to put all its "actual costs" before the Commission, including "the actual written-down value" of its copper network.

Samuel then discussed monthly pricing of the Line Sharing Service which most Internet service providers use to sell ADSL broadband services.

"Telstra has recently made public statements about how a AU$3.20 interim LSS determination allows Telstra's competitors to get wholesale broadband access for the price of a cup of coffee, then sell a retail broadband service for the cost of a restaurant meal."

Samuel stated that Telstra ignored several important factors in this analysis. Firstly LSS was only one input in a broadband service (others including telephone exchange equipment, and customer support, for example). "That adds up to quite a lot of coffees -- maybe even a decent meal," the ACCC boss said.

Secondly, pricing for the LSS reflected past pricing choices Telstra had made when it chose to recoup all of its network costs by charging for voice line rental -- when in actual fact the telco's copper network could provide a variety of services.

"The ACCC has consistently stated that it is open to Telstra putting forward proposals which re-balance the distribution of costs between its voice and broadband services, including the LSS," Samuel said.

Rather than being forced to arbitrate pricing disputes between carriers (the regulator currently has a list of around 30 disagreements), according to Samuel, the ACCC preferred carriers to approach it with voluntary undertakings to provide access to their networks at prices based on demonstratedly efficient costs and under reasonable terms and conditions that balanced consumer and industry needs.